CP All Said to Prepare Takeover Offer for Thai Retailer

CP All Pcl, the world’s third-biggest operator of 7-Eleven convenience stores, is preparing a takeover offer for Siam Makro Pcl, said people with knowledge of the matter.

A deal between the Bangkok-based companies may be announced as soon as this week, two people said, asking not to be identified as the information is private. Utrecht, Netherlands-based SHV Holdings NV owns about 64 percent of Siam Makro, data compiled by Bloomberg show.

CP All and Tesco Plc are adding outlets in the nation of 67 million people after the government raised minimum wages and introduced price guarantees for agricultural crops to boost rural incomes. Siam Makro has a market value of about 163.7 billion baht ($5.7 billion), making a takeover potentially the largest ever of a Thai company, data compiled by Bloomberg show.

“It’s still a good deal all around,” said Andrew Yates, head of international equity sales for Asia Plus Securities Pcl in Bangkok. “The Dutch can’t or won’t grow it, so it makes sense to sell. CP can grow it and they would rather not see a competitor buy it, so price is largely irrelevant for them. It shows the power of the Thai domestic economy.”

Joost van Klink, SHV’s company secretary, declined to comment in an e-mailed response to questions today. Officials at CP All and Siam Makro could not be reached.

CP’s Tumble

Siam Makro has surged 30 percent in the past six trading sessions. The retailer was suspended from trading today after saying it’s “in the process of disclosing significant information.”

CP All fell 6 percent, its biggest decline since May 9, to 43.50 baht in Bangkok today, trimming the company’s market value to about 391 billion baht.

Siam Makro trades at about 38 times analyst estimates for 2013 earnings, according to data compiled by Bloomberg. Big C Supercenter Pcl, the nation’s second-biggest operator of hypermarket stores, fetches a multiple of about 24, and the SET Index trades at about 14 times estimated earnings.

“There is a concern that CP All may acquire Siam Makro at a very expensive price,” said Chakrit Puechpan, the head of domestic equities at MFC Asset Management Pcl, which oversees the equivalent of $10.5 billion. CP All “may have to raise a large amount of funds from new borrowings or share sales to fund the purchase. Even with the current market price, Siam Makro is already trading at very high valuations.”

Asia Crisis

CP All, controlled by billionaire Dhanin Chearavanont’s Charoen Pokphand Group, last year said it may open 7-Eleven stores in southern China and Vietnam. Dhanin, who bought a $9.4 billion stake in Ping An Insurance (Group) Co. in February, said this month that he’s seeking more acquisitions in China.

Charoen Pokphand was once Siam Makro’s largest shareholder with a stake of as much as 47 percent in 1997, the same year that the devaluation of Thailand’s baht triggered a financial crisis that pushed many Asian economies into recession.

After the crisis, Dhanin sold stakes in companies including Siam Makro and Lotus Supercenter, which was bought by Tesco. In May 2005, a Charoen Pokphand unit sold 7 percent of Siam Makro back to the company that controlled the retailer for 60 baht per share. The group still owns about 1 percent of Siam Makro.

New Stores

Siam Makro operated 57 Makro stores and five Siam Frozen stores by the end of 2012. It opened five new Makro stores in 2012, helping to boost revenue by 15 percent to 112 billion baht last year, the company said on Feb. 27. The Bangkok-based company’s profit rose 37 percent to 3.56 billion baht in 2012.

At its current market value, a Siam Makro acquisition would top the largest on record in Thailand, the $5.5 billion purchase of PTT Aromatics & Refining Pcl by PTT Chemical Pcl in 2011, data compiled by Bloomberg show.

SHV, a closely held energy company, hired advisers and aims to complete the sale of its holding in Bangkok-based Siam Makro by the end of this year, the Thai-language Prachachat reported on its website on April 1, without saying where it obtained the information.

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